ARABIAN EXPRESS LINE LIMITED OF UNITED KINGDOM Vs. UNION OF INDIA

JUDGEMENT

(1.) IT is the contention of the petitioners that the first petitioner Arabian Express Line Ltd. of United Kingdom is a company incorporated in the United Kingdom (U.K.) The second petitioner is a director of the first petitioner company and is a non resident Indian. The company was incorporated on 18th June, 1992 in the name of 'Cookquick Trading Ltd.' The name of the company was changed from 'Cookquick Trading Ltd.' to 'Arabian Express Line Ltd.' w.e.f. 10th July, 1992. Copies of the certificate of incorporation of the company named Cookquick Trading Co. and the certificate of incorporation of change of name as Arabian Express Line Ltd., w.e.f. 10th July, 1992 are produced on record of this petition.

(2.) IN this petition, it is contended that the respondents be directed to give effect to Art. 9 of the Covenant between the Govt. of India and the Govt. of U.K. of Great Britain and Northern Ireland for the avoidance of double taxation and prevention of fiscal evasion with respect to tax on income and capital gains executed under S. 90 of the IT Act, 1961. In support of that, it is pointed out that the AAC, Company Circle, Calcutta, has issued a certificate dt. 18th June, 1993 (Annexure 'K') to the effect that M/s Arabian Express Line Ltd., U.K., is a resident of U.K. and that in accordance with Art. 9(1) of the Agreement for Avoidance of Double Taxation between the Govt. of India and the Govt. of U.K., the entire shipping income of the U.K. company is exempt from tax in India w.e.f. 1st April, 1992. It is also stated that the aforesaid certificate would be in force till the validity of the relevant provisions exempting such income in the double taxation avoidance agreement with U.K. and is subjected to any other order that may be passed subsequently in this behalf. The petitioners have also produced similar certificate dt. 16th Nov., 1992 issued by the Asstt. CIT, Circle 2(1), Bombay. In that certificate, it is also expressly stated that the operation of ships by M/s Arabian Express Line Ltd., U.K. is exempt from production of necessary port clearance certificate as required under S. 172(6) of the IT Act. It is submitted that, as the first petitioner company is incorporated in U.K., under Art. 9 of the Covenant between the Govt. of India and the Govt. of U.K., the petitioners are not liable to be taxed under the provisions of the Indian IT Act. Despite the documentary evidence produced before the ITO, the ITO, Gandhidham, vide his order dt. 30th March, 1993, levied tax and imposed penalty. He has also issued notice under S. 271(1)(c) of the IT Act for furnishing inaccurate particulars of income. That order is challenged before this Court by filing this petition.

(3.) AS against this, it is contended by the learned counsel for the respondents that the provisions of s. 172 of the IT Act are applicable in the present case, because it is found by the ITO that the first petitioner company was not a genuine company engaged in the business of shipping. He further submitted that the ITO has rightly applied the principles laid down in the case of McDowell & Co. Ltd. vs. CTO (1985) 47 CTR (SC) 126 : (1985) 154 ITR 148 (SC). He lastly submitted that against the order passed by the ITO, the petitioners have approached the appellate authority, who has rejected the appeal and, therefore, this petition is not maintainable.